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Saudi Headlines Spur Bullish Action

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Oil prices moved sharply higher on Thursday, as buyers reacted bullishly to comments by the Saudi Arabian oil minister about the possibility of future OPEC production cuts. While past words by OPEC members about the need to reduce output have been commonplace, the headlines made by the Saudis was certainly more noteworthy. To that end, there is a meeting scheduled for late September in which both OPEC and non-OPEC members will attend. Such news was met with fevered buying, though equity markets were also well bid during the day (with U.S. markets reaching all-time highs). The finished products (RBOB and Heating Oil) posted even greater gains. Cash markets in the Gulf Coast were supported by two noted refinery problems, including a massive fire at the Motiva Convent, Louisiana refinery.

The market was actually very quiet overnight and early Thursday, though by early morning the market began to pick up its rate of ascent. September WTI picked up a dollar in the morning, and then an additional dollar just before noon. The Saudi comments were the prime reason behind the move, though short covering also added to the sharp rise. By early afternoon, WTI was up nearly 2 dollars (finished products up six cents). The afternoon proved to be very tame with limited changes, though by then the tone of the day was already set. At the settle, September WTI closed up $1.78 at $43.49. The OPEC / non-OPEC meeting is tentatively scheduled for the last week of September (in Algeria).


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